GARMA, HAR and rules of thumb for modelling realized volatility

Authors

David E. Allen, Edith Cowan University
Shelton Peiris

Document Type

Journal Article

Publication Title

Risks

Volume

11

Issue

10

Publisher

MDPI

School

School of Business and Law

RAS ID

64619

Comments

Allen, D. E., & Peiris, S. (2023). GARMA, HAR and rules of thumb for modelling realized volatility. Risks, 11(10), article 179. https://doi.org/10.3390/risks11100179

Abstract

This paper features an analysis of the relative effectiveness, in terms of the Adjusted R-Square, of a variety of methods of modelling realized volatility (RV), namely the use of Gegenbauer processes in Auto-Regressive Moving Average format, GARMA, as opposed to Heterogenous Auto-Regressive HAR models and simple rules of thumb. The analysis is applied to two data sets that feature the RV of the S&P500 index, as sampled at 5 min intervals, provided by the OxfordMan RV database. The GARMA model does perform slightly better than the HAR model, but both models are matched by a simple rule of thumb regression model based on the application of lags of squared, cubed and quartic, demeaned daily returns.

DOI

10.3390/risks11100179

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 License.